Foreign Investors, Private Information, and Price Discovery

55 Pages Posted: 4 Oct 2010 Last revised: 27 Jun 2018

See all articles by Jun Cai

Jun Cai

City University of Hong Kong (CityUHK) - Department of Economics & Finance

Richard Ho

City University of Hong Kong (CityUHK) - Department of Economics & Finance

Robert A. Korajczyk

Northwestern University

Zheng Zhang

Peking University - Department of Finance, Guanghua School of Management

Date Written: June 20, 2018

Abstract

We examine the relation between intra-day price discovery and proxies for financial openness and investor accessibility using a sample of intra-day price and quote data of 1,504 stocks from 23 emerging markets. We measure price discovery by weighted price contribution across seg-ments of the trading day. There is a reliable relation between price discovery in early trading and direct foreign ownership, controlling for other factors. A better legal environment is significantly related to the speed of price discovery. Foreign ownership and a better legal environment also lead to more informative prices at the opening of trading.

Keywords: Emerging Markets, Price Discovery, Weighted Price Contribution, Foreign Ownership, Market integration, Market Microstructure

JEL Classification: F30, F36, G10, G14, G15, G18

Suggested Citation

Cai, Jun and Ho, Richard Yan-ki and Korajczyk, Robert A. and Zhang, Zheng, Foreign Investors, Private Information, and Price Discovery (June 20, 2018). Available at SSRN: https://ssrn.com/abstract=1687116 or http://dx.doi.org/10.2139/ssrn.1687116

Jun Cai (Contact Author)

City University of Hong Kong (CityUHK) - Department of Economics & Finance ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong

Richard Yan-ki Ho

City University of Hong Kong (CityUHK) - Department of Economics & Finance ( email )

Kowloon
Hong Kong

Robert A. Korajczyk

Northwestern University ( email )

Kellogg School of Management
2211 Campus Drive, Room 4357
Evanston, IL 60208-0898
United States
847-491-8336 (Phone)
847-491-7781 (Fax)

HOME PAGE: http://www.kellogg.northwestern.edu/faculty/directory/korajczyk_robert.aspx#research

Zheng Zhang

Peking University - Department of Finance, Guanghua School of Management ( email )

Peking University
Beijing, Beijing 100871
China

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